INTERVIEW: GameStop

Traditionally in games, a company’s expansion means war – territorial occupation, and the slow amassing of legions of worker-soldiers.

In the digital age the rules are the same, but it’s not employees companies are recruiting. It’s new audiences, willing warriors in the online revolution.

GameStop knows this all too well.

As the world’s largest games retailer, it understands territorial expansion like no other. Since its formation from a middleweight indie called Babbage’s in 1995, it has grown into a 6,500-strong global force. International rival Electronics Boutique (2005), Irish chain Gamesworld (2007) and French retailer Micromania (2008) were all consumed along the way. At the last count, it had almost 1,300 stores across Europe.

Globally, with a staff count sometimes close to 50,000 (including part-time and seasonal staff), it has more employees than Nintendo, Activision, EA, Take-Two, THQ and Ubisoft combined.

Even though it still has yet to make a meaningful play in some markets (its store count for the UK is only in the single digits – the lowest across its portfolio), the firm has moved its objectives beyond the physical.

While it is the largest games retailer in the world, it has designs on becoming one of the biggest suppliers of games content in any form via an expansion into online.

For Chris Petrovic, the GM of the firm’s relatively new digital ventures group, the strategy is a way for GameStop to keep apace with the changing lifestyles of the 500m people that visit its stores every year.

“Our new strategy is an acknowledgement that gamers across all categories are faced with more and more choices to fill their entertainment time,” he tells MCV. “Whereas earlier on in the console cycle they didn’t have as many other opportunities to engage in gameplay.

“A first huge step in any business is acknowledging the sea-changes facing your industry – and the next is having the fortitude to get ahead of the curve and capture the opportunity there.”

Like everyone else in the games industry, GameStop has been scratching its head trying to work out its place in online and where to put its bets in the long-term – but in the here and now, its focus has been on online communities.

It bought Irish online games firm Jolt late last year – and then two weeks ago snapped up US Flash games portal Kongregate. GameStop’s thinking is that it must understand where its current user-base is spending time online.

“We see a large crossover in customers [between GameStop and Kongregate] and what we want to do is continue to provide those same core gamers access to all the different kinds of games they are playing,” adds Shawn Freeman, SVP for e-commerce and GM of digital business at GameStop.

“We do a great job delivering console experiences to the living room, but now we are also providing them to the PC and mobile devices.”

But it also provides the firm a glimpse into business models untapped by retail.

“It gives us additional insight into the burgeoning free-to-play market,” explains Petrovic. “What makes Kongregate very unique is that this audience is ‘core’ – there are real synergies with GameStop customers. We know that our customers play games outside of the living room, and that they spend time on Kongregate, and that the free-to-play business is growing – and we’ll get more involved in that.”

Isn’t that a challenge for GameStop? Free-to-play is about giving away content – such as Flash games from hobbyist developers – for free, with the money made from advertising or item sales. But GameStop is about selling complete packages, isn’t it?

“It’s an opportunity, not a challenge,” says Petrovic. At face value, that statement sounds hollow – the classic corporate media trained trick of deflecting a negative observation. But it seems GameStop really is interested in this area.

He adds: “We have half a billion customers coming into our stores every year with a concerted choice to have a high-fidelity experience. But we know they are faced with more and more choices. And as those choices continue to proliferate discoverability and the curation of quality continues to become a challenge. If we can extend those touch points and extend beyond bricks and mortar stores then it is a win-win for them and us as they will continue to see us as a trusted destination – regardless of whether it is for the physical or digital.”

Freeman readily admits that there is a contrast in moving a retailer, which needs to sell things to survive, towards being an online portal, which often has a more relaxed attitude to the distribution of content: “While we broadly understand it, there is a lot of expertise in effectively monetising that area and gameplay we get from these acquisitions.”

So GameStop is plugging a hole in how its portfolio addresses its current customers. But what comes next for a traditional retailer looking to grow its talents in digital distribution?

“For us we feel that that nature of gaming is evolving from a product-based offering to a service-based offering,” says Petrovic. “‘Games as a service’ is an overused tagline in the industry right now – but it bears out.

“We truly feel we capture that in retail, plus online with our current businesses. What we are looking at now is an ongoing relationship with consumers where it’s not just a single purchase business model. That used to be the core focus of GameStop’s business and continues to be important – it’s the core revenue driver.”

But it might not be the core revenue driver in future, and should that tipping point come, Petrovic and Freeman want GameStop to not just be location in a shopping centre or mall that users have to leave their homes to get games from. They want it to be the online site of choice to buy, demo, download, read about and discuss games.

“We do see that there are a lot of players, through research and insight, that want to play games outside the living room,” says Petrovic. “So we feel there is an opportunity to extend that relationship – we already speak to them when they are in stores so why not continue that when they are playing games across other devices or other arenas that aren’t the living room?”

In that context, it won’t be a surprise if GameStop in times becomes less like GAME and more like IGN, Amazon and Xbox Live. It can be a content firm that provides service, editorial and support for gamers and game developers – not just the owner of thousands of concrete rooms around the world filled with a 1,000 feet of shelving that consumers may or may not visit.

Certainly, GameStop is keen to learn more about how digital content can be part of its offer ­– and the best way to do that is experience first-hand how the market will develop.

The other advantage, of course, is that even if GameStop’s focus is primarily on the crossover between online gaming and the people who visit its stores, the secondary benefit is reaching those it doesn’t usually engage with. Such as that the UK audience – the one country with a tiny number of GameStop outlets.

Petrovic says: “The benefit of any digital business is that it is location agnostic. It does give us purview into those territories where we don’t have a physical presence. It give us an opportunity to make an entrée into areas where we don’t have a retail presence at all, or where our retail presence isn’t as strong as other countries.”

A powerful global retailer, with lots of users around the world, but not necessarily needing physical placement in every territory? Sounds like GameStop has already founds its place in the online world.

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MCV is the leading trade news and community site for all professionals working within the UK and international video games market. It reaches everyone from store manager to CEO, covering the entire industry. MCV is published by NewBay Media, which specialises in entertainment, leisure and technology markets.